Price increase fears delay postal reforms

Europe's post offices are in a race against time to get a new payments system for cross-border mail in place by the end of the year.

Internal differences and European Commission concerns about a possible hike in the prices paid by customers are holding up agreement.

Most post offices say that establishing a new system is a crucial step in their drive to streamline and improve their services in a sector which private companies are demanding should be opened up to competition.

But consumer groups say it threatens higher prices with little in return.

The new system, which most post offices want to see in place from January 1997, is based on an end to their old agreements to pay each other standard amounts for the final delivery of incoming letters and the introduction of a new freedom to raise charges in return for faster delivery.

However, Spain is holding out against the change and the Commission, pushed by consumer worries, has put detailed questions to post offices about threatened increases in charges to pay for promised quality improvements.

Spain's post office, Correos y Telegraphos, fears the new compensation system, calculated on domestic postal tariffs in each country, would make it a serious net loser since domestic postal tariffs in Spain are relatively low.

Under the terms of an original deal between EU post offices, Spain can cause the collapse of the so-called terminal dues agreement if it does not sign up by the end of the year.

It was originally expected to do so by 31 October, but problems remain.

'Negotiations with Spain are still continuing,' said Francis Migone, director of terminal dues for the International Post Corporation (IPC). The IPC is handling implementation of the agreement on behalf of EU post offices.

Migone, who persuaded Switzerland to sign up to the agreement last week to join the 14 other EU countries and Norway, does not rule out an eventual decision by member post offices to go ahead without Spain.

The Commission has pressed post offices to give more details of the quality improvements they will deliver in return for price increases, after protests from consumer groups.

Migone says that increases can only be triggered if post offices boost their performance by delivering letters the day after they arrive in the country of destination.

The new agreement was only forged after the Commission objected to the previous arrangement following a complaint from international express carriers, based on claims that intra-post office payments bore no relation to the costs incurred.

However, the latest agreement has come under fire from the European consumers' organisation BEUC.

It has written to Competition Commissioner Karel van Miert warning that the new deal allows a wide scope for price increases without appearing to give post offices enough incentives for quality improvements.

The consumer group points out that the new system does not tie charges to real costs, but only to domestic tariffs. This is likely to mean a serious increase in the price of letters delivered to high-cost countries, such as Germany, and will give such post offices little incentive to lower their tariffs.

BEUC argues that the Directorate-General for competition (DGlV) should not clear the agreement unless it can show what the implications of the new system would be for consumers.